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Federal Judge Puts Hold On Pennsylvania's Over-order Change

Federal Judge Puts Hold On Pennsylvania's Over-order Change
Dairy producers, don't count on extra over-order premiums just yet.

Early this week, U.S. Middle District Judge William Caldwell temporarily blocked Pennsylvania Milk Marketing Board's Order A-968 that would have made certain that in-state dairy producers received their full over-order premiums. Judge Caldwell, acting on a suit by the Pennsylvania Association of Milk Dealers, put a stay on the plan until a legal solution is found.

The Milk Marketing Board's plan would have gone into effect Oct. 1. If implemented, it would add more than $6.7 million a year to over-order premium payments to about 7,400 farmers.

The "hitch", according to the dealers, is that the measure requires them to pay premiums for milk produced outside Pennsylvania and brought in for processing and sale. They contend it interferes with interstate commerce.

Proponents of Order A-968 say it rectifies a situation where milk dealers were underpaying Pennsylvania farmers. The price of milk sold in the state includes a 25-cent-a- gallon "over-order premium" that's to be passed from the dealers to the farmers.

This change, says Pennsylvania Ag Secretary Russell Redding, was slated to bring an "stranded premiums" back to producers. Stranded premiums refer to the portion of a 25-cent price retail customers pay on a gallon of milk that processors keep rather than returning to producers. The Milk Marketing Board's order is the right thing to do," he contends, "and provides true benefit to our dairy producers.

Under the existing program, the amount paid to producers was pro-rated based on the ratio of milk purchased from Pennsylvania producers compared to the total purchase amount, which included out-of-state supplies. If half of the milk a processor purchased is from Pennsylvania, the over-order premium obligation to those farmers is reduced by half. The other half is kept by the processor despite the Milk Marketing Law, which states it is to be given to producers.
The milk dealers claim the order would cause "irreparable market injury" to dealers, saddling them with tens if not hundreds of thousands of dollars in extra costs they couldn't recoup. The association is joined in its suit by Fair Oaks Farm (a producer/processor) and Millard Dairy in Indiana and Ohio, respectively.

In ordering an injunction, Judge Caldwell cited financial hardships that two dealers claimed they' suffer if the rule takes effect. He also noted that the U.S. Supreme Court struck down a Massachusetts milk premium law under similar circumstances.

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